A tech-heavy aggressive portfolio with high risk and low geographic diversification

Report created on Jan 13, 2025

Risk profile Info

6/7
Aggressive
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio is heavily weighted towards Uber Technologies Inc and Vanguard S&P 500 ETF, making up nearly 70% of the total allocation. Such concentration can lead to significant volatility, especially since these are both equity-based investments. A more balanced portfolio might include a wider range of asset types, such as bonds or international equities, to reduce risk and enhance stability. Benchmark comparisons often show a more diversified mix, which can provide better risk-adjusted returns and cushion against market swings.

Growth Info

Historically, the portfolio has delivered an impressive CAGR of 21.25%, indicating strong growth over time. However, the max drawdown of -39.19% highlights the potential for significant losses during downturns. While past performance can offer insights, it's crucial to remember that it doesn't guarantee future results. Comparing this to a benchmark like the S&P 500, which typically has a lower drawdown, suggests that the portfolio's aggressive stance may not suit all investors. Diversifying could help mitigate such risks.

Projection Info

The forward projection using Monte Carlo simulations shows a wide range of potential outcomes, with an annualized return of 31.28%. This method uses historical data to forecast future scenarios, but it's important to note that it's not foolproof. The 5th percentile outcome is significantly lower than the median, indicating that while high returns are possible, so are substantial losses. Investors should consider adjusting their portfolios to align with their risk tolerance and investment goals, ensuring they're comfortable with potential volatility.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly allocated to stocks, comprising nearly 100% of the total assets. This lack of diversification across asset classes can increase risk, as it makes the portfolio highly susceptible to market fluctuations. Most benchmarks include a mix of stocks, bonds, and other asset classes to balance risk and return. Introducing fixed-income assets or alternative investments could provide a buffer during volatile periods, helping to stabilize returns and reduce overall risk.

Sectors Info

  • Technology
    69%
  • Financials
    10%
  • Telecommunications
    5%
  • Health Care
    4%
  • Consumer Discretionary
    4%
  • Industrials
    3%
  • Consumer Staples
    2%
  • Energy
    1%
  • Utilities
    1%
  • Real Estate
    1%
  • Basic Materials
    1%

With nearly 69% of the portfolio in the technology sector, there's a notable sector concentration, which can lead to increased volatility. While tech stocks have driven growth, they can also be sensitive to economic changes, such as interest rate hikes. Benchmarks often show a more balanced sector allocation, helping to spread risk. To reduce sector-specific risks, consider diversifying into underrepresented sectors, which could provide more stability and potential growth opportunities.

Regions Info

  • North America
    100%

The portfolio is predominantly focused on North America, with 99.6% of assets in this region. This geographic concentration limits exposure to international markets, which can offer diversification benefits and potential growth opportunities. Global benchmarks typically include a broader range of geographic exposure to capture growth in emerging and developed markets. Expanding into other regions could reduce risk and enhance returns by capitalizing on global economic trends and reducing reliance on a single market.

Redundant positions Info

  • Vanguard Information Technology Index Fund ETF Shares
    Schwab U.S. Large-Cap Growth ETF
    Vanguard Russell 1000 Growth Index Fund ETF Shares
    Vanguard S&P 500 ETF
    High correlation

The portfolio includes a group of highly correlated assets, such as various Vanguard ETFs, which can limit diversification benefits. When assets move together, they may not provide the risk reduction that diversification typically offers. During market downturns, this could lead to larger losses. It might be beneficial to replace some of these overlapping assets with less correlated ones to enhance diversification and improve the portfolio's risk-return profile.

Risk vs. return

This chart shows the Efficient Frontier, calculated using your current assets with different allocation combinations. It highlights the best balance between risk and return based on historical data. "Efficient" portfolios maximize returns for a given risk or minimize risk for a given return. Portfolios below the curve are less efficient. This is informational and not a recommendation to buy or sell any assets.

Click on the colored dots to explore allocations.

The portfolio could benefit from optimization using the Efficient Frontier, which aims to achieve the best possible risk-return ratio. Currently, the portfolio's expected return is below that of a more efficient allocation. By adjusting the weightings of existing assets and potentially introducing new ones, the portfolio could enhance returns without increasing risk. This involves careful analysis of asset correlations and risk profiles to ensure the portfolio meets the investor's objectives.

Dividends Info

  • Apple Inc 0.40%
  • Meta Platforms Inc. 0.30%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard Russell 1000 Growth Index Fund ETF Shares 0.40%
  • Vanguard S&P 500 ETF 1.30%
  • Weighted yield (per year) 0.54%

The portfolio's dividend yield is relatively low at 0.54%, indicating a focus on growth rather than income. For investors seeking regular income, this may not be ideal. Dividends can provide a steady income stream and add stability to a portfolio, particularly during volatile markets. Consider incorporating higher-yielding investments to balance growth with income, which could appeal to those looking for both capital appreciation and regular payouts.

Ongoing product costs Info

  • ARK Innovation ETF 0.75%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard Russell 1000 Growth Index Fund ETF Shares 0.08%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.03%

The portfolio's total expense ratio (TER) is quite low, at 0.03%, which is beneficial for long-term performance. Lower costs mean more of the returns stay in the investor's pocket, compounding over time. This aligns well with best practices for cost management in investing. However, the ARK Innovation ETF has a relatively high fee of 0.75%, which could be scrutinized. Evaluating whether lower-cost alternatives could achieve similar objectives might be worthwhile.

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